The stock market has become a very popular place that is supposed to help you grow your money. And just like anything else there are a lot of common misconceptions that emerge with it. Here are just a few to look out for.
1. Traders Need to be a Genus
It is actually a common misunderstanding in all areas of life. People seem to think that in order to be successful at anything that has a lot of potential you have to have an IQ of like 200. That isn’t true, the average person can accomplish a lot more then you think.
IQ is not the major factor for success in this world. You can be a millionaire with a below average IQ and you can be a bum on the street with an above average IQ. The difference is vision and determination.
2. You Should Watch the News and Know Everything
Another common misconception is that if you want to be successful you need to watch the news and learn as much as you can about a company before you even consider buying it. This is simply not true, first of all it is impossible to know everything about a company.
Second there are a lot of false rumors when it comes to trading. There have been a lot of very successful traders who have made money without watching the news. Many traders even avoid watching the news because it harms their trading.
Successful traders instead create their own system of rules and then follow it. This way they know that it works and do not have to analyses random data and rumors and try to make sense of it all.
3. Buy Stocks Low and Sell Them High
Buy low sell high doesn’t work because it does not clarify what is low and what is high. Is a stock low when it drops from $40 to $30? Is it low when it drops to $20 after that? Stocks can fall for a long time, so if all you have to go on is “buy low” you can easily get in during the middle of a storm and lose money.
You can also make money by buying stocks high and selling them higher, and in many cases that is the most profitable thing to do.